The position paper sets out the EIUG’s position on the terms of reference of the review of the energy bill relief scheme (EBRS), the increase in gas and electricity prices since Spring this year and the forward energy price curves up to winter 2023, the measures other countries have taken in response to these increased energy prices, in particular for their energy intensive industries (EIIs), and the wider carbon leakage and supply chain risks if manufacturing in the UK were to become commercially unviable for EIIs if Government withdraws its current support.
The EIUG calls on the UK Government to classify EIIs as vulnerable and support them beyond March 2023 with energy costs, but without relying on indefinite state support. Due to the nature of their manufacturing processes, EIIs are disproportionally exposed to high energy prices and most are exposed to international competition as well, making it more difficult to absorb or pass-through recent energy prices rises without rendering themselves uncompetitive.
The UK Government has already recognised that certain EIIs cannot simply absorb or pass-through increased energy costs and has put measures in place, such as the EII exemption schemes, to mitigate the cost of energy – in particular electricity prices – before energy prices started to rise last year.
The EIUG considers that all companies in sectors eligible for these schemes to reduce the indirect cost due to the renewable deployment policies in industrial electricity prices should be classified as vulnerable. The European Commission uses similar eligibility in its temporary crisis framework. Adopting sectoral eligibility – without a business level test – from the these schemes would therefore minimise competitive distortions with the EU.
The EIUG therefore calls on Government to trigger article 44 of the Subsidy Control Act regarding national economic emergency and provide targeted and temporary emergency support to EIIs most exposed to the increase in energy prices.